LONDON — Burberry Group plc, which pulled itself out of the red and reported profits of 82.2 million pounds, or $131.5 million, in the year ended March 31, is pushing further into emerging markets and cleaning up distribution in established ones.
This story first appeared in the May 27, 2010 issue of WWD. Subscribe Today.
Figures have been converted at average exchange rates for the 12-month period.
On Wednesday, the brand reported a 6.5 percent increase in revenue to 1.28 billion pounds, or $2.04 billion, from 1.2 billion, or $1.92 billion, driven by the expanding accessories business — nonapparel is now Burberry’s largest product category, generating 36 percent of sales — and a string of retail openings.
As a result of cost-cutting and efficiency measures, including a reduction in inventory, the company ended the year with cash reserves of 262 million pounds, or $377.3 million. Current and forward-looking figures have been converted at actual exchange rates.
Chief executive officer Angela Ahrendts said there’s a lot of momentum at the brand, and much more to be done.
“We were able to deliver. We made record profits in what was a challenging market,” said Ahrendts in the slick conference room near her corner office at Burberry’s Horseferry House headquarters in Westminster. “And shame on us if we do not optimize our performance and the brand’s momentum.”
Ahrendts said the current fiscal year would be about “purifying” the brand and pushing deeper into emerging markets. “We have to correct some legacy issues that still plague us,” she said, adding Burberry was already winding down wholesale accounts in Europe and terminating “ancillary licenses” for Japanese men’s wear and leather goods.
She said last year the brand closed 300 specialty store accounts across Europe, and planned to terminate more this year. “We don’t need multiple accounts, customers who are buying little bits of the collection. We need partners who can purchase Burberry in the right way.”
Stacey Cartwright, chief financial officer, said the clean-out would continue over the medium term. The company said the ongoing termination of licenses and wholesale accounts would dent 2010-11 profits by 5 million pounds to 10 million pounds, or $7.2 million to $14.4 million.
Earlier this year, Burberry revealed plans to close its Spanish factory, pulling its local collection out of that market and replacing it with the global Burberry line. As a result of the Spanish restructuring, Burberry expects to lose 10 million pounds, or $14.4 million, in sales in the current fiscal year.
With regard to emerging markets, Burberry will nearly double capital expenditure to 130 million pounds, or $187.2 million, in the current year. That money will go toward 20 to 30 new store openings, chiefly in the Americas and Asia-Pacific, and to refurbishing current units and beefing up Burberry’s e-commerce site.
On Wednesday, the company opened a second, 2,800-square-foot Burberry Brit store on Columbus Avenue in New York. Today, Burberry’s chief creative officer, Christopher Bailey, will celebrate the opening of the brand’s first store in Lebanon with an event for 600 guests at the White Club.
Earlier this year, the company opened a Burberry Latin America headquarters in São Paulo, Brazil, and this month cut the ribbon on a 2,808-square-foot store at the Iguatemi Centre in Brasilia.
Ahrendts said she expects to have four to five stores open in Brazil by the end of the fiscal year. “We believe Latin America to be one of the best potential long-term growth opportunities for the company,“ she said.
Burberry said start-up losses in these new regions will cost the company about 5 million pounds, or $7.2 million, in the current year.
The Americas region, which includes the U.S., generates 27 percent of sales and grew 2 percent during the year. Asia-Pacific accounts for 24 percent of revenue and grew 13 percent in the year, with much of the growth coming from South Korea and Hong Kong.
Cartwright added that Burberry’s India joint venture, with the local fashion retailer Genesis Colors, already has produced three stores with a fourth set to open in Mumbai over the next few weeks.
She added the brand’s nonapparel joint venture in Japan was operating two flagships and nine department store concessions, with a further 10 shop-in-shops in the pipeline.